Indian Dairy Outlook: Signs of Strength Amid Challenges

India’s dairy sector is showing a mix of resilience and volatility, as highlighted in Zerodha’s A Glass Half Full for Indian Dairy. The latest quarterly results of listed dairy companies—Hatsun Agro, Heritage Foods, and Dodla Dairy—reflect both the opportunities and pressures shaping the industry. Hatsun Agro emerged the strongest performer with a 17% year-on-year revenue rise to ₹2,428 crore and an impressive 73% jump in profit after tax to ₹110 crore. This growth was driven largely by its strong value-added products (VAP) portfolio, particularly ice-cream and curd, and by broad milk-procurement geography that insulated it from regional weather shocks.

Heritage Foods, meanwhile, posted a 9% revenue increase, yet saw EBITDA slip by over 1% quarter-on-quarter and nearly 7% year-on-year. The company faced stiff headwinds due to high raw milk prices, particularly because its procurement is concentrated in Andhra Pradesh and Telangana—two regions that experienced heavy monsoon disruptions. Dodla Dairy showed a modest 2.1% topline growth, but once adjusted for lower-margin commodity sales, its underlying growth tracked closer to 13%, with profit after tax rising to ₹66 crore. Together, these results paint a picture of a sector where companies with diversified sourcing and strong VAP offerings outperform those more dependent on a single region or bulk milk trade.

A major theme emerging from the analysis is the pressure of raw milk inflation. Unusually heavy monsoon rainfall this quarter created fodder shortages, hindered milk collection networks, and tightened supply. Dairies were simultaneously pushed to divert milk toward cream, butter and ghee production, which saw surging festive demand. This dual squeeze—tightening supply and higher fat-product demand—placed upward pressure on procurement prices. Companies with wider catchment areas or strong fat inventories were better positioned to absorb the shock, while others saw margin compression.

Zerodha also notes that value-added products have become the defining factor for profitability. Hatsun now derives nearly half of its revenue from VAP, grants it higher margins and more stable earnings. Heritage generates around 38% of its sales from VAP, with curd making up nearly 70% of this segment. Dodla derives about 30% of its revenues from VAP, also dominated by curd. The consistent trend: companies with deeper VAP portfolios are better shielded from milk price fluctuations. The recent reduction in GST on ghee, butter, cheese (to 5%) and paneer (0%) has further strengthened this segment, making premium value-added dairy even more attractive for producers and consumers alike.

Another key insight from the article is the power of brand loyalty in dairy. Consumer switching is low in categories like milk, curd, and ghee. Hatsun’s leadership in South India, with strong brands like Arun Ice Cream and Arokya Milk, translates into higher EBITDA margins of 13.4%, significantly above Heritage’s 6.9% and Dodla’s 9.1%. Strong branding combined with VAP capability appears to be the strongest formula for growth in the Indian dairy landscape today.

Industry Insight

The Indian dairy industry is poised for structural strengthening—propelled by rising demand for value-added products, favourable GST reforms, and the growing importance of brand trust. But profitability now hinges on diversifying procurement, investing in VAP, and building resilience against raw milk inflation and climate volatility. Dairies that balance scale with agility, and commodity milk with high-margin VAP, will lead the next phase of growth. The sector’s glass may not be completely full—but it’s certainly filling faster for those investing in the right capabilities.

Source : Dairynews7x7 Nov 14th 2025 Read full story here